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06 ASA International Group plc
Annual Report and Accounts 2022
Strategic Report
Governance Report Financial Statements Additional Information
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Chief Executive Officer’s review
Substantial improvement in performance after challenging years
With the business environment improving in many of our operating
countries, we experienced substantial growth and profitability in all markets, except India, Myanmar and Sri Lanka.
Introduction
We are pleased to see most of our businesses sustain the growth of their operations and financial performance in 2022, following the recovery made by these businesses in 2021 after a challenging couple of years. With the business environment improving in many of our operating countries, we experienced substantial growth and profitability
in all markets, except India, Myanmar and Sri Lanka. The Group’s pre-tax profits increased from USD 25.7 million in FY 2021 to USD 46.3 million in FY 2022. We seek to sustain our performance in the coming year as we continue to invest in the future with our digital strategy.
Business review 2022
The improvement in the operating environment in most of our markets saw demand for our loan
products increase as clients experienced an upturn in business activity. Against the backdrop of the macroeconomic challenges faced in our operating
markets due to the global impact of food, commodities and energy inflation, the high demand from clients contributed to the growth of our operations.
Excluding India, Myanmar and Sri Lanka, the Group added 112 additional branches and increased number of clients from 1.7 million to 1.9 million in 2022.
On a constant currency basis, OLP, excluding India, Myanmar and Sri Lanka, grew to USD 360 million in 2022 from USD 282 million in 2021. The growth
in OLP was combined with improved portfolio quality in these markets with PAR>30 at 3% as of December 2022 in all markets excluding India.
To limit financial losses and, simultaneously, maintain sufficient capital in India and Myanmar, the Group decided to downsize the operations in these two countries for now.
In India, the Company maintained its strategy to reduce disbursements and focus on the recovery of existing and overdue loans, which resulted in OLP shrinking by USD 61 million in 2022. We do expect that the major change of the regulatory environment in India, including the removal of the margin and interest rate cap, should translate into a positive effect on the future profitability of our operations in India.
In Myanmar, the operating environment remained challenging following the military takeover of government in February 2021. This resulted in our inability to operate in a few regions where the levels of civil unrest remained high. We do not expect the operating environment to substantially improve until a governmental settlement is reached.
In Sri Lanka, one of our smallest markets, the economic and political crisis faced in 2022 resulted in disruptions to our operations. However, we expect a gradual improvement of business and the operating environment in 2023 which should allow our operations to start gradually reaching new clients.
Financial performance
As a result of the improved operating performance in FY 2022, and the significant reduced expected credit losses charged to the Income Statement from USD 37.5 million in FY 2021 to USD 0.6 million in FY 2022, the Group realised net profits of USD 17.9 million, which was a substantial improvement over the USD 6.4 million achieved in FY 2021. I am pleased that all but three of our major operating subsidiaries exceeded pre-covid operating and financial performance on a constant currency basis in 2022. The performance of most of our operating countries, particularly Pakistan, the Philippines, Ghana and Tanzania, was excellent in terms of portfolio quality, growth and profitability.
The Group maintains a diversified risk profile with operations across thirteen markets in Asia and Africa.
As the impact of global market volatility, inflation and adverse FX movements in our operating markets
substantially varies per country, the Company benefits from this relatively high level of diversification.
07 ASA International Group plc
Annual Report and Accounts 2022
Strategic Report
Governance Report Financial Statements Additional Information
Back
Chief Executive Officer’s review continued
Clients
2.3m
Outstanding Loan Portfolio (USD)
351.2m
Expected credit losses
The Company reduced its reserves in the Balance Sheet for expected credit losses from USD 27.5 million in FY 2021 to USD 16.9 million in FY 2022, for its OLP, including the off-book BC portfolio and interest receivables. Following an additional write-off of the outstanding Covid affected portfolio (USD
10.8 million in FY 2022 vs USD 32.9 million in FY 2021), the Company maintained significant reserves, primarily due to the overdue loans in India and Myanmar.
The USD 16.9 million ECL reserves on OLP is concentrated in India (57%) and Myanmar (20%), with the remainder spread across the other countries as a percentage of each country’s outstanding
loan portfolio or as an aggregate amount. Further details on the ECL calculation, including the selected assumptions, are provided in note 2.5.3 to the consolidated financial statements.
Digital financial services
In anticipation of a rapidly digitising world, also in the segment of our low-income clients, the Group made progress with the implementation of its digital strategy, which will create a more attractive and competitive client proposition. Our digital strategy entails the implementation of the newly acquired core banking system, our digital financial services platform (‘DFS App’), and our route to embedded finance with the so-called Supplier Market Place (‘SMP’). Along with the digitalisation of our client relationship, we will make progress in further digitising our employee processes as well.
The implementation of the core banking system (T24) in Pakistan as the first country in the Group continues as planned and is targeted to go live in the second half of 2023.
The SMP app is currently being rolled out in Ghana. The first clients are onboarded and placing their online orders.
The DFS app, in combination with the new core banking system (T24) in Ghana, is expected to go live after the Pakistan implementation.
Competitive environment
The competitive landscape has not changed much across the Group. Our strongest competitors are in India, the Philippines, Nigeria, Tanzania and Uganda. In most other markets, we face less competition from traditional microfinance institutions. Up until now, we have not noticed significant competition from pure digital lenders.
Dividend
After careful consideration, the Board has decided not to declare a dividend in 2023 on the 2022 results. However, the Company
looks to return to its pre-Covid dividend policy in 2024 on the 2023 results, assuming the operating and financial performance continues to improve and flows of dividends from major operating subsidiaries return to normal.
I express my gratitude to all of our colleagues in our head offices and in the field in all our countries for their commitment, hard work and for always keeping their focus on supporting our clients in difficult operating circumstances.
Dirk Brouwer
Chief Executive Officer
21 April 2023
Management transition
As of the AGM on 15 June 2023, Ms. Karin Kersten, currently Executive Director, Corporate Development, will be appointed the new CEO.
Mr. Brouwer will step into a new role as (i) Deputy Chairman of the Board of ASA International and
(ii) Special Adviser to the new CEO, the Executive Committee and the broader management team.
Dirk Brouwer: “After having run ASA International, for the most part together with Shafiq, for more than 15 years, I am very pleased that we have found in Karin a formidable successor to take over the baton as the first female CEO of our company. Karin and
I have worked closely together over the last 1 1/2 years, and I am very confident that she will be able to successfully lead the Company going forward in an increasingly digital world.”
Karin Kersten: “I am honoured and excited to have received the confidence of Dirk and the Board to assume the role of Chief Executive Officer of this great company. Together with all ASA International colleagues, I will build on the Company’s legacy, with its powerful ‘ASA Model’, and continue to focus on further increasing financial inclusion of female microentrepreneurs across Asia and Africa.”
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